A generalized preferential attachment model for business firms growth rates. II. Mathematical treatment.

DOI10.1140/EPJB/E2007-00165-8MaRDI QIDQ978799zbMATH OpenOpenAlexWikidataFDO

Authors J. Martínez

Publication date 25 June 2010

Published in The European Physical Journal B. Condensed Matter and Complex Systems (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/physics/0609020

Mathematics Subject Classification ID

Applications of statistical and quantum mechanics to economics (econophysics) (91B80) Economic growth models (91B62) Time-dependent statistical mechanics (dynamic and nonequilibrium) (82C99)

Abstract: We present a preferential attachment growth model to obtain the distribution $P(K)$ of number of units $K$ in the classes which may represent business firms or other socio-economic entities. We found that $P(K)$ is described in its central part by a power law with an exponent $phi=2+b/(1-b)$ which depends on the probability of entry of new classes, $b$. In a particular problem of city population this distribution is equivalent to the well known Zipf law. In the absence of the new classes entry, the distribution $P(K)$ is exponential. Using analytical form of $P(K)$ and assuming proportional growth for units, we derive $P(g)$, the distribution of business firm growth rates. The model predicts that $P(g)$ has a Laplacian cusp in the central part and asymptotic power-law tails with an exponent $zeta=3$. We test the analytical expressions derived using heuristic arguments by simulations. The model might also explain the size-variance relationship of the firm growth rates.

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Cites work

• scientific article; zbMATH DE number 1614382 (Why is no real title available?)
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• Hierarchy in social organization
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Cited in

(4)

• Firm growth and Laplace distribution: the importance of large jumps
• A generalized preferential attachment model for business firms growth rates. I. Empirical evidence.
• Preferential growth: solution and application to modeling stock market
• Generalised central limit theorems for growth rate distribution of complex systems

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